Author: jfortenberry@fortenberrylaw.com

You can order your National Employee Benefits Day t-shirt here.

Yesterday, the House passed (422 Ayes, 3 Nays) “H.R. 1253, the Health Insurance Restrictions and Limitations Clarification Act of 2009” which amends ERISA, the Code, and the Public Health Service Act to require that limitations and restrictions on coverage under group health plans be timely disclosed to group health plan sponsors and timely communicated to participants and beneficiaries under such plans in a form that is “clear and explicit.”

To get a good understanding of what this bill is supposed to accomplish, I refer you to the floor speech given by Representative Michael Burgess [R-TX]:

Mr. Speaker, in January 2001, the Department of Labor, the Internal Revenue Service, and the Health Care Finance Administration issued a rule in accordance with the Health Insurance Portability and Accountability Act, better known as HIPAA, of 1996 that was designed to guard against discrimination in coverage in the group health market. While addressing the issue of discrimination based upon participation in certain activities, these rules allowed continued discrimination in the form of nonpayment based upon the source of the injury.

So, in other words, you could have an employer-sponsored health insurance, which many of us do, have your premiums deducted from your paycheck, and yet be responsible for paying your own medical treatment if you were harmed. Trip and fall at home, no problem. Trip and fall while skiing on vacation with the family, and you get the bill. This is simply unfair.

People are led to believe that care for a broken arm, for example, is the same regardless of how the injury happened, but in fact that is not the case.

The lack of clarity underlying these exclusions has created a confusing situation for individuals that may ride motorcycles, horses, snowmobiles, or participate in other activities that could result in an injury. Millions of American enjoy these activities safely every year within the framework of State laws and utilizing proper safety precautions. The bill we are voting on today will take away the ambiguity and make certain that people are aware of any such restrictions in their coverage.

Again, this is not a bill that would require anything new to be done other than people be told up front and in plain language if there are limitations on their health care policy.

We are going to stand up and shine the light on these exclusions so that Americans will not be caught off guard by exclusions buried deep within an insurance plan.

The legislation would retain HIPAA’s provision of allowing group health plans to establish limitations or restrictions on the amount, level, extent, or nature of benefits or coverage provided, but would require that any limitations and restrictions:

(1) Be disclosed in writing to the plan sponsor in advance of the point of sale to the plan; and

(2) Be disclosed by the plan sponsor to participants and beneficiaries in a form “that is easily understandable” by such participants and beneficiaries.

The legislation also provides that the plan sponsor and the issuer of the coverage must provide such description to participants and beneficiaries “upon their enrollment under the plan at the earliest opportunity that other materials are provided.”

The IRS has issued Notice 2009-27 addressing a lot of issues pertaining to the COBRA subsidy program under ARRA.

Please note that the Notice makes it clear about which entities are eligible to take the credit against payroll tax liabilities:

Under ARRA, the “person to whom premiums are payable” is based on the nature of the plan and which COBRA continuation coverage provisions apply. In the case of a group health plan that is a multiemployer plan, the multiemployer plan is allowed the credit. In the case of a group health plan subject to the Federal COBRA requirements or the temporary continuation coverage requirements under the FEHBP, or a group health plan under which some or all of the coverage is not provided by insurance, the employer maintaining the plan is allowed the credit. For any other group health plan subject to ARRA (generally, fully insured coverage subject to State continuation coverage requirements), the insurer providing coverage under the group health plan is allowed the credit. These are the exclusive rules for who may take the credit unless the Secretary provides otherwise pursuant to the authority in section 6432(b).

Also, Q & A 58 provides further coverage of this issue:

Q-58. In the case of an insured plan subject solely to State law requiring the insurer to provide continuation coverage, if the employer collects the reduced premiums from assistance eligible individuals and pays the full premium to the insurer, is the employer eligible to take the payroll credit directly?

A-58. No. Under section 6432(b)(3), in the case of an insured plan subject solely to State law with respect to the requirement to provide continuation coverage, the only person entitled to be reimbursed for the premium reduction through the payroll credit (unless and until provided otherwise in future guidance) is the insurer providing the coverage under the group health plan.

The Notice also provides helpful guidance regarding what constitutes an involuntary termination of employment, for purposes of determining whether a terminated employee is entitled to the COBRA subsidy. Included is a statement that an “involuntary termination” does not include a reduction in hours, but that an employee’s voluntary termination in response to an employer-imposed reduction in hours “may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.”

So, it appears from this statement, that an employer might, due to economic conditions, reduce an employee’s hours, causing them to lose health care coverage, but the affected employee would not be entitled to the subsidy unless he or she went ahead and voluntarily terminated.

Finally, the Notice makes it clear that an employer may allow an eligible individual to elect coverage different from the coverage under the plan in which such individual was enrolled prior to the involuntary termination, but that the premium for coverage offered under this option cannot exceed the premium for the coverage the individual had prior to the involuntary termination.

From the Wall Street Journal: ‘Stable’ Funds in your 401(k) May Not Be. The article discusses how fiduciaries are reviewing their stable-value fund offerings and “looking to move retirement-plan assets out of certain stable-value funds because of performance concerns” but “finding it’s not always easy to do so.”

More:

In a recent report, David Merkel, chief economist and director of research at brokerage firm Finacorp Securities, advised clients who use stable-value funds to “consider moving funds out if the market value is unlikely to be able to support the book value.”

“I would not be surprised to see a stable-value fund fail in 2009,” Mr. Merkel later said in an interview.

The Stable Value Investment Association’s Ms. Mitchell replies: “It’s got to be a cataclysmic event for that to happen. I’m not saying it can’t happen, but it would be the perfect storm.”

The DOL has posted on their website model notices to be used in complying with ARRA’s COBRA subsidy provisions. Please note that there are different notices available for the different groups of qualified beneficiaries that are required to receive notices about the premium reduction pursuant to ARRA. The notices must be provided by April 18, 2009 which leaves very little time for employers to act.

General Notice (Full version): Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event, AND who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the additional information required by ARRA. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

General Notice (Abbreviated version): The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. The DOL indicates that this notice may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

Alternative Notice: Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a state law. Since continuation coverage requirements vary among states, the DOL has indicated that issuers should modify this model notice as necessary to conform it to the applicable state law requirements. The DOL further indicates that issuers may find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

Notice in Connection with Extended Election Periods: Plans subject to the federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

A survey released by WorldatWork and the American Benefits Council indicates that the majority of employers are continuing to offer a 401(k) match:

A full 74 percent of employers reported no change in the employer matching contribution; 15 percent have either increased or are considering increasing the employer match; eight percent have either decreased or are considering decreasing the 401(k) match, and three percent reported eliminating the match.

According to the survey, more than nine out of ten U.S. companies offer an employee 401(k) plan. In addition, despite the widely reported drop in account balances, two-thirds (66 percent) of organizations indicated that at least 70 percent of eligible employees participated in those 401(k) plans in 2008.

The survey was conducted in December of 2008 by WorldatWork, sampling 4,938 U.S. WorldatWork members. A total of 505 members responded to the survey.

Contrast that survey with this one by Sun Life on the Social Security System which indicates that 48% of Americans would prefer to stop paying into the Social Security system, knowing that they would not receive any benefits if they did. All of this may have to do with the lack of confidence in the government’s ability to continue to fund these programs as the survey indicates:

70% of workers in their 30s and 66% in their 40s do not believe Social Security will be available when they are 67.

More on this survey from Plan Sponsor here.

From the Wall Street Journal: “Pension Bills to Surge Nationwide: Many States and Cities Face Hard Choices Because of Market Declines. Excerpt:

Many state and city governments reeling from financial woes are about to get whacked again, this time by an unforeseen increase in their pension bill thanks to market declines.

In an effort to stave off tax increases, New Jersey lawmakers on Monday will consider a bill that would allow municipalities to defer payment of half their annual pension bill, due April 1, for one year. Those towns, counties and schools that opt to defer would face a higher pension bill for years to come.

Other states and municipalities are facing similarly difficult choices. In Pennsylvania, the state employees and public teachers pension funds both have warned that employer contribution rates could surge seven-fold from about 4% of payroll to 28%, starting in 2012. The Detroit police and fire pension plan might have to double employer contribution rates to 50% of payroll by 2011, according to the fund’s outside actuary.

Read here how the Governor of Illinois is considering a 50% state income tax increase to assist with his state’s pension funding issues (discussed here.)

Michael Fox over at Jottings By an Employment Lawyer has some great thoughts on the Employee Free Choice Act recently introduced into Congress, including these remarks:

I think the opponents of EFCA are making a mistake focusing so much on card check. How a union is formed is important, and my belief is that the secret ballot is far superior to card check. However, in my view the most radical change contained in EFCA is binding arbitration for the first contract. The current national policy, which as mentioned above, is that collective bargaining is the preferred way of organizing the workplace, also is founded on the principle that an employer while required to bargain in good faith, was never forced to concede or agree to any point. To “force” concessions, unions have the economic power to withhold their labor, strike. If EFCA is passed as introduced, for first contracts this would no longer be true. If agreement is not reached, a solution will be imposed, which will require an employer (and employees) to be bound for two years. It represents a total reversal of the current policy, and so far is getting relatively little attention. If that continues, what will happen is that a “compromise” will be reached that retains secret ballot elections (albeit it with major changes designed to make it easier for unions to organize) but keeping binding arbitration for first contract. That would mean that one of the underlying principles of our current system will have been changed, with little discussion or my guess, is little understanding that it is even happening.

More from this Fulbright & Jaworski article on EFCA:

Some have argued that this provision of EFCA would constitute an unconstitutional taking of an employer

Watson Wyatt’s survey of 489 large U.S. employers about health care produced some interesting results about how employers view the recent health care proposals floating around in Congress:

The survey found that employers do not support most of the commonly prescribed solutions to the issues that plague the health care system. More than two-thirds (68 percent) are very or somewhat supportive of reforms that advance the consumer-oriented model and emphasize greater individual responsibility. Respondents are least in favor of tax policy changes that remove tax deductibility of employer premium contributions, with only 12 percent supporting those proposals.

Also, regarding the use of health savings accounts:

Health savings accounts (HSAs) are currently offered by 34 percent of companies. By 2010, that number is expected to increase to 43 percent. Health reimbursement accounts (HRAs) are offered by 21 percent today, and only 3 percent plan to add one next year.

Workforce Management reports on the survey here.

Yesterday, the Health, Employment, Labor and Pensions Subcommittee of the House Education and Labor Committee held a hearing to “examine ways to increase health care insurance coverage for Americans through their employer.” Access the testimony given at the hearing here.

Also, did you know that the House Education and Labor Committee now posts video excerpts of testimony on YouTube which you can access here?

UPDATE: More from KaiserNetwork.org on the hearing here.